Jason Stipp: I'm Jason Stipp for Morningstar. As the economic recovery seems to have backed off a little bit in the first quarter of this year, do we have expectations for more optimism in the back half of the year? Here with me to help answer that question is Morningstar's Bob Johnson, director of economic analysis.

Thanks for joining me, Bob.

Bob Johnson: Great to be here.

Stipp: So, you have some beliefs that the second-quarter gross domestic product will be better than that of the first quarter, and you also think that the third and fourth quarters will show acceleration on top of that.

Johnson: Yes.

Stipp: So, you have some optimism now while some folks are beginning to worry more about the economy. What's the difference of opinion there?

Johnson: Well, just last week we talked about the things that are affecting the economy. There are a lot of numbers that are coming in a little weaker than people had hoped, and even that I might have hoped. And we probably have another month or two of that left, but it's related to the Japanese auto supply-chain situation, which is affecting the whole auto industry and the whole manufacturing complex, if you will.

So, that's certainly going to hurt the manufacturing-related data for another month or two, but the demand for cars isn't going away. Consumers are continuing to spend on cars. So, we think some of that demand will just be deferred until the second half of the year. So, that's one of the reason I'm more optimistic on the second half.

Stipp: So, that's manufacturing, and you've said that the manufacturing isn't the biggest part of the economic recovery. So, even if we do see some normalization there, you are probably going to have to see some continued improvement elsewhere. What else are you looking at and what else is making you optimistic?

Johnson: Well, I still feel very good about the consumer. I think, the consumer continues to spend. This week's shopping-center data again shows that they grew year-over-year about 3%. So, that number continues to move along, despite high gasoline prices and some really bad weather. So, if we get gasoline prices moving into the right direction and the weather gets a little better, I can see even better outlook for the consumer in months ahead.

Stipp: How important is continued employment growth or accelerating employment growth to have a better second half of the year on the economic front?

Johnson: I'm glad you asked that one because I think employment is an important part of the story now. For so long we said it wasn't, and now it really is key. And I'm looking for job growth of 200,000 to 250,000 jobs a month, and sure we may have a bad month that falls somewhere out of line with that, but that's my general expectation. All the surveys that we have seen seem to indicate accelerating hiring. So, I continue to believe that 200,000-250,000 is a reasonable expectation and would be consistent with a 3%-3.5% GDP growth.

Stipp: What about wage growth because we have had a spike in inflation that has backed off a bit recently? What's your take on inflation as potentially a risk factor and what you expect for the months ahead?

Johnson: Well, certainly one of the things I was most worried about is inflation kind of spooking the consumer and taking away his ability to spend. You didn't have much wage growth, and if you throw a whole bunch of inflation on that especially for the low-end consumer with higher gasoline prices, then you've got a lot of problems. And now we've seen gasoline back off a little bit. We were almost at $4 according to AAA survey on the nationwide number. Before I came down here today, I checked and it was $3.81. I think, it's likely to be $3.60 within the next month. So, I think, all of a sudden gasoline has been a huge hit, and it will start to come back to a more normalized level in the months ahead.

Stipp: So, what are looking at then for full-year GDP, and what do you think we need to hit in the second, third, and fourth quarters to get to that full-year forecast?

Johnson: Well, I think, I'm still at a 3.5% number for the full year, which is aggressive. I think I've got a pretty aggressive number here on the second quarter thinking that it's going to be in the 3%-3.5% range. And then as we have a bounce back in government spending and on the defense side in the months ahead, and also continued consumer spending, I think we could get up in that 3.5%- 4% range in the back two quarters of the year, which is not what most people are thinking.

Stipp: So you mentioned that things that could be hopefully tailwinds, I guess, on the flip side could also be risks, if we see some stagnation in employment and if inflation spikes again because of a number of things. One of them could be continued turmoil in the Middle East, for example. So that could be a risk factor to your forecast?

Johnson: That's absolutely a risk factor. Inflation seems to be under better control now. I'm feeling better about it now than I have in a long time, with the the second round of quantitative easing going away at the end of June. Some of that thing that's been keeping a little layer of pressure on all commodities is going to go away, and I think that at least we're going to have a stabilization in commodity prices in the second half.

Stipp: So, most people think that QE2 going away would be a negative thing, but you think it could actually help at least as far as the pressure on commodities prices going up and up and up?

Johnson: That's correct.

Stipp: So I want to ask you a little bit on a couple of things that we haven't touched on yet. One of them is housing. To what extent do we need to see a housing recovery for you to hit that forecast?

Johnson: Well, I'm optimistic on housing long-term as you know, but it may not be a 2011 event. I will say we're hearing more positive comments out the housing sector. Bob Toll, of Toll Brothers, in the firm's earnings press release made the comment that the firm doesn't know where people are seeing these lower and lower prices; Toll Brothers in some markets actually has been able to raise prices on the homes that the firm has out there. He said there's some confusion between people taking distressed merchandise and comparing that with prices of houses in good neighborhoods with good economics, and he said that Toll Brothers has actually been able to pass along a few price increases in select markets.

Stipp: So, you're not necessarily banking on a huge recovery there in 2011 to hit the forecast?

Johnson: No, but I don't think it's going to hurt us anymore this year either.

Stipp: Also the last thing I wanted to ask you about is how imports and exports also have an effect on GDP. To what extent is that a wild card in your forecast?

Johnson: Well, there's an outside chance we get lucky with more agricultural exports and capital goods and that maybe net exports help us out a little, but I wouldn't bank on that. I think we're going to have more employment and more consumer spending in the second half, especially now that gasoline has freed up a little bit of the money. Unfortunately, when the consumer buys goods, a lot of them are imported goods. So since imports overall are a little bit bigger than exports, I'm afraid that maybe it won't be much of a help this year.

Stipp: So, keep an eye on consumer, keep an eye on employment, and keep an eye on inflation; all are big factors. Hopefully if enough goes our way, we'll be able to see that optimistic forecast that you have. Thanks for joining me, Bob.